Avenue Supermarts slumps 4% after Q4FY20 numbers

EBITDA in FY20 stood at Rs2,128cr, up 30% as compared with Rs1,633cr during FY19 and margin improved from 8.2% in FY19 to 8.6% in FY20.

May 26, 2020 11:05 IST India Infoline News Service

Avenue Supermarts Ltd. (ASL), one of the largest food & grocery retailers in India, posted a net profit jumped by 44% to Rs1,301cr and 24.32% rise in net sales to Rs24,870cr in the year ended March 2020 (FY20).

The stock is currently trading at Rs2,298, down by Rs104.55 or 4.35% from its previous closing of Rs2,402.55 on the BSE.

EBITDA in FY20 stood at Rs2,128cr, up 30% as compared with Rs1,633cr during FY19 and margin improved from 8.2% in FY19 to 8.6% in FY20.

The company’s overall revenue grew by 23% during the quarter ending March 2020, however, during the month of March 2020 it grew by just 11% over March 2019 due to the lockdown effect of the last 9 days of March this year. The trend rapidly deteriorated in April during which more than half of our stores remained closed for operations or operated for extremely restricted hours.

The revenue for April was down by more than 45% as compared to April 2019. Its margin has also seen erosion as regulations did not permit us to sell any Apparel and General Merchandise products. “We have also seen substantial absenteeism of our staff with some stores seeing 70% absenteeism in the beginning but now recovering. We are however not yet near our normal employee attendance. As some of the restrictions continue, we are seeing reduced sales and lower than usual footfalls in our stores. Significantly large EBITDA declines are to be expected due to lower sales, lower gross margins, higher cost of operations on account of hardship allowance to front line staff during lockdown and higher personal hygiene/store sanitation costs,” DMart said.

The challenges are likely to continue in the current financial year as the economy gradually opens after the lockdown. Social distancing practices and changing consumer preferences are two key trends that we need to be watching carefully. Inventory write-offs due to shelf life aging and obsolescence doesn’t seem to be a significant issue of worry yet, however it could become a meaningful problem if the lock down measures continue to be as stringent as before and for a further period exceeding 40-50 days from now. “Our new store openings will be impacted as construction activity will commence with some lag due to availability of labour & material and the onset of monsoon from mid-June onwards in most parts of the country,” the company said.

D-Mart follows Everyday low cost - Everyday low price (EDLC-EDLP) strategy which aims at procuring goods at competitive price, using operational and distribution efficiency and thereby delivering value for money to customers by selling at competitive prices. Commenting on the performance of the company

Neville Noronha, CEO & Managing Director, Avenue Supermarts Limited, said: “Overall, FY20 saw a healthy 24% revenue growth while PAT margins were in line with expectations. Our LFL growth for FY2020 was 10.9%. Two reasons for this. One is that stores that are more than 5 years old grew at a rate lower than the previous year and most of the stores that are younger are peaking faster, even before they qualify for the 24 months LFL measurement. We opened a record 38 new stores, 6-8 of those stores should have actually opened last year. We also completed a successful equity fund raise to make our balance sheet stronger, resilient and also help augment our future growth.”

The outbreak of Covid-19 is subjecting India and the world to extreme stress and uncertainty. Amidst the tumult of this unprecedented period, our priority has been to safeguard the health and well-being of our employees, customers and communities at large while continuing our business operations with responsibility and care.

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